A long standing prediction of steady state gas-phase chemical theory is that H2O and O2 are important reservoirs of elemental oxygen and major coolants of the interstellar medium. Analysis of SWAS observations has set sensitive upper limits on the abundance Of O2 and has provided H2O abundances toward a variety of star forming regions. Based on these results, we show that gaseous H2O and O2 are not dominant carriers of elemental oxygen in molecular clouds. Instead the available oxygen is presumably frozen on dust grains in the form of molecular ices, with a significant portion potentially remaining in atomic form, along with CO, in the gas phase. H2O and O2 are also not significant coolants for quiescent molecular gas. In the case of H2O, a number of known chemical processes can locally elevate its abundance in regions with enhanced temperatures, such as warm regions surrounding young stars or in hot shocked gas. Thus, water can be a locally important coolant. The new information provided by SWAS, when combined with recent results from the Infrared Space Observatory, also provide several hard observational constraints for theoretical models of the chemistry in molecular clouds and we discuss various models that satisfy these conditions.